Bixi Files for Bankruptcy, But Bike-Share Goes On

By the time it happened, it seemed almost inevitable. On January 20, the Bixi bike-sharing company, based in Montréal, announced that it was filing for bankruptcy protection, citing debts totaling about $49 million, including a total of nearly $38 million from the city of Montréal.

Bixi, also known as Public Bike System, is based in Montréal, but its reach extends around the globe, with systems in place in more than a dozen cities in North America, Europe, and Australia, mostly operated by third parties. Mia Birk, vice president of Alta Bicycle Share, which operates eight Bixi-provided bike-share systems in the United States and Melbourne, Australia, said in an email shortly after the bankruptcy announcement that operations of those systems would be unaffected.

"Our systems across the country — in Washington, D.C., Boston, New York City, Chicago, the Bay Area, Columbus, OH, and Chattanooga, TN — are up and running and ABS will ensure that they continue to operate without interruption,” Birk wrote. “Given our plans to expand current systems and launch new systems this year, we're in constant communication with both PBSC as well as its suppliers to ensure we can do so successfully.”

Bixi has been trying, without success, to sell off its international operations.

Montréal’s new mayor, Denis Corderre, said in a statement that his city’s Bixi system, which is also operated by PBSC, will be up and running again this summer regardless of the bankruptcy filing. Whether it will go forward past 2014 is unclear. “If Bixi can be saved, it is through the Bankruptcy and Insolvency Act,” said the mayor. The system would require some kind of municipal subsidy to continue.

PBSC/Bixi came onto the international transportation scene with a bang when the first Bixi system launched in Montréal in 2009. Its robust bikes and solar-powered modular docking stations, developed under the city’s auspices, won design awards and attracted widespread interest at a time when bike-sharing was gaining traction among planners and elected officials.

Today, Bixi systems are in place in cities across the world, including London, New York, Minneapolis, and Chicago, where they are operated by third parties, including Alta. But Bixi has been unable to parlay that growth into a stable business model, and has been plagued by accusations of poor management and legal troubles, including a suit by the company that designed the system’s software. Many Canadian politicians have raised questions about whether government can or should be involved in this type of commercial enterprise.

In response to its multiple problems, Bixi has been restructuring and trying, without success, to sell off its international operations. The most recent potential sale fell through last December, reportedly when the unnamed potential buyer got a closer look at the company's books. If Bixi proves unable to sell the international division, Montréal taxpayers could be on the hook for as much as $38 million (you can find a comprehensive timeline of the company’s evolution and struggles here.)

In a statement on its Facebook page, Bixi blamed $5.6 million in outstanding payments from international clients for its financial woes. That’s an apparent reference to $3 million the company has claimed it's owed by Alta for delivery on New York City's bike-share system and $2.6 million owed for Chicago's*, payments withheld because of problems with delivery and implementation of their systems. (Alta’s Birk said that her company is up to date on all its payments to Bixi "with the exception of specific holdbacks related to PBSC software or hardware deficiencies.") Bixi says it will continue to restructure with bankruptcy protection from creditors, and that no jobs will be eliminated in the immediate future.

Bixi’s problems obviously run much deeper than a few outstanding payments from clients with fulfillment problems. Despite being owned by the city of Montréal, PBSC has a long history of failing to disclose its financial information in a timely fashion, and it has yet to release its 2012 statements. Montréal Mayor Coderre was blunt in his assessment to the Montréal Gazette, admitting that his city had "embarked on commercial operations that it should not have been involved in. ... It is not up to taxpayers to assume the financial risk involving a business plan."

For fans of bike-share in cities such as New York, the bankruptcy raises questions. The launch of the New York system, now encompassing approximately 5,000 bikes at 330 stations, was delayed months beyond its original date because of software problems. The long-awaited rollout of an additional 4,000 bikes at a total of 600 stations, which would substantially increase the Citi Bike coverage area and its usefulness to commuters, has yet to be scheduled.

New York City officials referred comment to Alta's Birk, who reiterated her assertion about the future of her company's systems in general. "ABS is committed to providing great service to our clients (cities) and all customers of bike share. All our bike share systems are up and running and ABS will ensure that they continue to operate without interruption/smoothly."

In Chicago, officials said that the relatively new Divvy system would not be affected by PBSC’s problems. “Chicago’s bike share system continues to operate as normal, and current operations will not be impacted by the announcement that Public Bike System (PBSC) has filed for bankruptcy,” wrote Peter Scales of the Chicago Department of Transportation in an email.

For riders who depend on the bikes for commuting or occasional recreational use, the Bixi systems they use will look the same as ever for now. But the pressure on Alta and other management entities to come up with long-term alternatives to an unreliable PBSC is only going to increase. And the question of how to craft an effective business model for a bike-share system such as Bixi's remains up in the air.

*Correction: This piece has been updated to clarify that outstanding payments Bixi has said it is owed from New York and Chicago are payments Bixi would like to collect from Alta, the operator of the bike-share systems in those cities, not from the city governments themselves.